Dialling the correct code

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Updated: Mar 28, 2010 23:07 IST

Sunil Bharti Mittal’s acquisition of the Africa operations of Zain Telecom for $10.7 billion is the latest episode in the great Indian takeover. Coming as it does when international capital markets have not yet fully recovered from the worst crash in living memory, Mr Mittal’s ability to raise $8.5 billion for the acquisition is testimony to India’s rising export of frugal engineering.

Zain loses money in Africa despite its customers running up telephone bills twice as large as Airtel users. Mittal’s game-changing outsourcing skills — Bharti Airtel has hived off most of its core telephony operations, making it one of the least expensive telecom service providers in the world — could help turn Zain around. Particularly for a company that has 42 million customers in the continent against the 33 million Airtel added in India last year in an intensely competitive market.

Mr Mittal has led the surge in telecommunications investment in India that ought to top $80 billion in the five years to 2012. Indian mobile telecom companies have, in the process, signed up 545 million customers of which Airtel has 125 million, but the easy money is behind them. Every new subscriber brings $4.9 of business a month to Bharti Airtel and this number is falling precipitously as India’s telecom network spreads from its cities to its villages amidst a bruising price war. Africa, where one in three persons has a cellphone but runs up a monthly bill of $8, thus offers Mr Mittal a chance to dip into a revenue pool that he is accustomed to converting into profit. This explains Mr Mittal’s continuing obsession with the African market, where he was prepared to pay 40 per cent more for each MTN customer before talks with the South African telecom company broke down last year over ownership issues.

In a way, the writing is on the wall for Mr Mittal and his tribe. The money in emerging telecom markets remains in voice traffic while mature networks are seeking extra dollars from data. India is poised to auction radio frequency for third-generation telecom services like high-speed internet access and streaming video. But on current indications telecom companies that land the extra spectrum will use it to unclog their networks to carry more voice traffic from even more customers. Mr Mittal is fervently seeking out the billions at the bottom of the pyramid — he has taken his company to Sri Lanka and Bangladesh —and Africa should give him the scale to create a new template for an industry at the crossroads.